With the caucuses and primaries upon us, election season is finally underway. But the United States isn't the only country with an important election this year. Several other countries like South Africa, South Korea, and Mongolia are holding votes for municipalities and legislatures. But there are only three emerging markets with presidential elections this year: Taiwan (which already held its vote in mid-January), Peru, and the Philippines.

These elections are important because emerging markets, as an asset class, faced a beating last year: the Morgan Stanley International EM index fell nearly 15% in 2015. These markets also saw $500 billion in outflows, in the run up to the Fed's decision to hike rates on December 16, 2015. Challenged by slowing growth and falling markets, policy makers in developing nations like Peru and the Philippines will need to allay anxiety among voters. Let's look at who is running in these two countries, and how these elections may serve as election catalysts.

Peru: Ex Presidents Facing Off

Change is coming to Peru. For much of the past ten years, Peru enjoyed robust economic growth. As a mineral- and material-rich country, it was geared for China's construction boom. From 2002 to 2013, Peru boasted an annual average growth rate of around 6%. In 2012, Peru's exports peaked at nearly $46 billion, six times higher than in 2002. In fact, the World Bank and IMF held their annual meetings in Lima in 2012, to highlight economic and social progress that Peru had made.

But as China's growth has slowed, so too has Peru's exports which dipped 17% in 2014. The country now has a trade deficit and is hemorrhaging billions of dollars in foreign exchange reserves. Government officials lowered expectations of Peru's 2015 GDP growth rate possibly below 4%. As commodities have sold off, unemployment has spiked as those who work in the materials sector can't find as much work. Moreover, the Peruvian market has sold off considerably, liquidity has disappeared, and it narrowly escaped being downgraded by Morgan Stanley Capital International from an emerging market to frontier market. Such a move would have prevented many emerging market institutional managers from investing in the market.

With a bleak economic picture, the current president Ollanta Humala has seen his approval ratings fall to 16%. He is term limited and cannot run again. Then again, an incumbent's political party has never won an ensuing presidential election. The country will hold its presidential election in April 2016. Because there are so many candidates splitting the vote, there will likely be a runoff election in June.

There are five main contenders for the election: Keiko Fujimori, Pedro Pablo Kucynksi, Cesar Acuña, Alan Garcia, and Alejandro Toledo. The leading candidate is Fujimori, who is daughter of a former president. She leads the conservative political party and ran unsuccessfully for president in 2011. She is promising to kick-start the economy with a public investment initiative to insulate the country from the boom-bust commodity cycle. She has raised the possibility of issuing more bonds to fund these projects, and allocating money from a $10 billion emergency reserve fun towards construction initiatives.

The candidate who is polling second in most surveys is Kuczynksi who is also a conservative. He is a familiar face, serving as the country's prime minister over a decade ago, and he's an accomplished economist. He is pledging to cut taxes for small businesses and job growth.

Cesar Acuña is seeing momentum in recent polls, even surpassing Kuczynski in one. He is a multimillionaire education entrepreneur who has served as mayor of Trujillo. He leads the Progress political party. The two other candidates, Alan Garcia and Alejandro Toledo, have already served as presidents of Peru in previous decades. Both are center-left candidates.

Change is in the air. And that change seems to be a market-friendly conservative politician. If Fujimori or Kucynski are elected, markets would likely respond favorably. It would be an opportunity to buy a Peruvian ETF such as the MSCI All Peru Capped ETF. If you want a more direct way to invest in Peru, try Credicorp (BAP - Get Report) , which trades on the New York Stock Exchange. It is a financial conglomerate that has many divisions such as commercial and investment banking to insurance. It is a widely held stock among emerging market institutional money managers.

BAP Chart BAP data by YCharts

Of course, if commodity prices remain depressed, Peru's markets will be subdued. But look for two catalysts this spring: the presidential election and MSCI's decision on whether Peru will remain an emerging market. Right now it looks as if there will be a new market-friendly president and Peru will retain its status, which could boost the market higher.

Philippines: A New Face

Despite demonstrating robust growth, the economy of the Philippines has still slowed. It has come down from 7.1% in 2013 to 6.1% in 2014 and 5.8% in 2015, which was below President Benigno Aquino III administration's initial estimate of 6%-to-7% for last year. The downward trend is due to a slowing global economy, uncertainty surrounding the effects on agriculture by El Nino, and a slower pace of public spending.

Even though there is a slowing, the country is enjoying a strong economic period, and it's one of the fastest growing nations in Asia. With a population of over 100 million, the Philippines are the second largest nation in the region, which is known as ASEAN or Association of Southeast Asian Nations. The country isn't totally reliant on an export model (though it sends copious amounts of electronics overseas), as its large population engenders ample domestic demand. The finances of the country are relatively sound too, having had a current account surplus for over a decade. And perhaps the trump card of this economy is the diaspora of ten million Filipinos around the world that remit money to their mother nation. These capital inflows help to steady the country's economy, which doesn't produce enough jobs for its citizens, and in which poverty is still a problem.

President Aquino has accomplished much during his tenure. He has fought corruption at the highest levels of government and introduced more transparency into the process of government decision making. He liberalized aviation policies so that foreign airlines could operate out of Manila, bringing more tourists to the island nation. He also led the effort to pass a comprehensive birth control plan, so that more people could have access to family planning and medical supplies. He even struck a peace deal with an Islamic insurgent group in the south. He has enjoyed healthy approval ratings over 50 percent for much of his presidency. But he is term limited and cannot run again.

Who will step forward as the next president? Filipinos will make that decision on May 9th. Here are the five main contenders:

Manuel "Mar" Roxas II is the former interior secretary and is Aquino's preferred candidate. Roxas has an impressive pedigree, as his grandfather was the first president of the Philippines after World War II. Roxas was an investment banker and trade secretary, too. He has campaigned on the continuation of Aquino's popular policies.

Grace Poe is a senator, and the adopted daughter of a well known political figure in the Philippines. Her parents were also well known movie stars, and therefore her name is widely known across the country. Despite her strong showing in recent polls, there is a question whether she is eligible to run for president as she lived abroad for many years. Poe has pledged to continue the policies of Aquino that have led to strong economic growth.

Jejomar Binay is the vice president of the Philippines, former mayor, and human rights lawyer. He started the race as the odds-on favorite to replace Aquino, but his poll numbers have dropped as he has faced allegations of corruption. He has pledged to increase the number of jobs, reduce poverty, and increase the pay of public sector employees such as teachers and police officers.

Miriam Santiago is a senator who is making her third bid for the presidency. She is an ex-professor of law, judge, and former head of the immigration bureau. She has been suffering from lung cancer but says she's healthy enough to run for president.

Rodrigo Duterte is the mayor of Davao City, a large municipality, and onetime lawyer. He is an outspoken critic of the country's injustices facing the poor.

While these candidates have political differences, they almost all recognize the success of Philippine's economy. Because Aquino's policies have helped engender robust growth, the market should respond favorably if Roxas, Poe, and even Binay are elected -- as all three want to continue and advance the work of Aquino.

The Philippines market has already sold of 10% since the beginning of the year, due in part to the decline in the region, especially in China. Remittance growth has also dropped about 3.7% throughout last year. Because the market has fallen, valuations are more attractive -- and it may be good time to enter. You can buy a Philippines ETF, like the iShares MSC Philippines ETF, and wait for the election catalyst. If you can buy locally, consider consumer names like SM Prime, which operates many shopping malls. The company has good earnings visibility and strong historical price performance. Avoid Philippines Long Distance Telecom, an incumbent phone company, even though it's listed on the New York Stock Exchange. The company isn't enjoying the robust growth as some of its peers.

As an investor, you don't have to limit yourself to the U.S. election. There are two other elections that you can trade.

 

 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned. Kabir Sehgal is the author of New York Times bestseller Coined: The Rich Life of Money And How Its History Has Shaped Us and The Wheels on the Tuk Tuk. He is also a Grammy-winning producer. Follow him on Facebook and Twitter.